NJ Employers Can’t Cut Corners When Executing Mandatory Arbitration Agreements

NJ Employers Can’t Cut Corners When Executing Mandatory Arbitration Agreements

For An Arbitration Agreement to be Enforceable, Employees Must Affirmatively Assent to the Terms

While technology has made it easier for employers to execute workplace agreements, it is still imperative to keep basic contract principles in mind. Notably, for an agreement to be enforceable, employees must affirmatively assent to the terms.

According to a New Jersey appeals court, Pfizer Inc.’s use of emailed arbitration agreements did not pass muster. “This case exemplifies an inadequate way for an employer to go about extracting its employees’ agreement to submit to binding arbitration for future claims and thereby waive their rights to sue the employer and seek a jury trial,” the Appellate Division of the New Jersey Superior Court held in Skuse v. Pfizer.

Dispute Over Mandatory Arbitration Agreement

In November 2017, plaintiff Amy Skuse filed an employment lawsuit against her former employer Pfizer, Inc. (Pfizer), and several other Pfizer officials. Her complaint alleged a violation of the New Jersey Law Against Discrimination (NJLAD), based on religious discrimination, and a failure to provide reasonable accommodation for her religious beliefs. In response to the complaint, the defendants sought to dismiss the suit and compel arbitration.

According to Pfizer, Skuse plaintiff electronically received and completed a training module presenting the company’s mandatory binding arbitration policy. In May 2016, Pfizer emailed to its workforce what it called a “training module” (or “activity” or “course”). The module described the company’s mandatory arbitration policy, as presented in a series of slides on computer screens. One screen provided employees with the opportunity to access a “Resource” link to the full text of the policy. In a separate email, the employer supplied a computer link to Frequently Asked Questions (“FAQs”) concerning the policy.

On the third slide of the module presentation, the employees simply were asked to “acknowledge” it with the click of an electronic button. The module declared that if an employee did not click the acknowledgement, but continued to work for the company for sixty or more days, the employee would be “deemed” to be bound by the arbitration policy.

While the arbitration policy is labeled an “agreement,” the module did not request employees to provide signatures conveying their agreement. Nor were the employees asked – within the four corners of the pivotal “click” box at the end of the presentation – to memorialize that they expressly agreed to the policy. They were only asked within the box to “acknowledge” it.

The trial court dismissed plaintiff’s complaint with prejudice and directed her to proceed with arbitration, pursuant to the terms of the company’s policy. While the court acknowledged that Pfizer’s acknowledgment procedure “nowhere specifically asks plaintiff to confirm that she has received the agreement,” it was persuaded that, given plaintiff’s continued employment well-past the specified sixty days and “[i]n light of the text on the slides and plaintiff’s action or inaction, plaintiff’s apparent intent was to be bound by this agreement.”

Court Rules Agreement Is Unenforceable

The Appellate Division reversed, holding that the mandatory arbitration agreement is unenforceable. “The wording and method of Pfizer’s training module is inadequate to substantiate an employee’s knowing and unmistakable assent to arbitrate and waive his or her rights of access to the courts,” the court wrote.

As the court highlighted, New Jersey’s case law has extended the contractual requirements of mutual assent and knowing and voluntary waiver to the setting of arbitration provisions contained within employment relationships. Specifically, in Leodori v. CIGNA Corp., 175 N.J. 293 (2003), the Supreme Court of New Jersey held that “a waiver-of-rights provision must reflect that an employee has agreed clearly and unambiguously to arbitrate the disputed claim.” Moreover, such a valid waiver “results only from an explicit affirmative agreement that unmistakably reflects the employee’s assent.”

In reaching its decision, the Appellate Division highlighted that the arbitration policy must be “presented in a fashion that produces an employee’s agreement and not just his or her awareness or understanding.” Specifically, the court found that the “click box” that appears at the end of the presentation was a “critical shortcoming” of the company’s procedure to obtain its employees’ individual assent to waive their rights. As highlighted by the court, it uses the verb “acknowledge” and does not use the verb “agree.” The court also noted that final slide thanks the employee for “reviewing” the document, and the whole process is referred to a “training activity.” According to the court, “Communications so vital to the mutual process of contract formation should not hinge upon loose and inconsistent wording that is reasonably capable of being misunderstood as something short of an agreement.”

The Appellate Division noted that employers like Pfizer can easily make arbitration agreements enforceable, while still relying on technology. As the panel explained:

[R]ather than euphemistically calling the process a unilateral “training” activity, the company could identify the process to employees with terms that more accurately convey what it actually must be: for example, an agreement and a waiver of rights. More importantly, to comply with the tenets of Leodori, 175 N.J. 293, the click box which seeks an employee’s legally binding response should contain the word “agree” or “agreement.” For example, it could say, “Click here to convey your agreement to the terms of the binding arbitration policy and your waiver of your right to sue.”

Finally, the Appellate Division rejected the trial court’s reliance on Jaworski v. Ernst & Young U.S. LLP, 441 N.J. Super. 464 (App. Div. 2015), in concluding that Pfizer’s sixty-day “deemer” provision was legally sufficient to manifest plaintiff’s assent to the arbitration policy, because she worked at the company for over a year after the policy became effective. “Unless and until the Supreme Court alters its precedent in Leodori, we respectfully decline to follow our sister panel’s ruling in Jaworski,” the court wrote. “The sixty-day provision, in the absence of separate evidence – apart from continued employment – of the employee’s affirmative assent to be bound by the arbitration policy, does not salvage defendants’ position.”

Key Takeaway for NJ Employers

As the decision in Skuse v. Pfizer makes clear, employers may rely on electronic means to disseminate and obtain employees’ assent to workplace agreements. However, in order to avoid judicial scrutiny, it is imperative to make sure that the terms of the agreement are clear and straightforward and that the employee’s consent is abundantly clear.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Joel N. Kreizman, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.